By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

A Cabinet minister yesterday said the National Insurance Board (NIB) is forecast to suffer a $32m deficit in 2025 despite earning an extra $4m per month in contribution income from last year’s rate rise.

Alfred Sears KC, minister of Immigration and National Insurance, told the House of Assembly that the combined 1.5 percent contribution rate increase that came into effect last July has already generated $4m per month since its implementation but the social security’s deficit “remains significant”.

He added that this is currently estimated at $32m for 2025, with 50 percent of the shortfall caused by the “ongoing gap” in contributions and benefits paid out.

“This policy adjustment has positively impacted the Fund’s revenue position, generating an additional average of $4m per month in contributions. This increase has proven essential in NIB’s ongoing efforts to strengthen the financial sustainability of the Fund,” said Mr Sears.

“Despite this positive development, NIB’s projected deficit for 2025 remains significant and is currently estimated at approximately $32m, inclusive of the additional income derived from the rate increase. It is important to highlight that a substantial portion of this deficit, $16.85m or 50 percent of the total projected shortfall, arises from the ongoing gap between contributions collected and benefits paid.”

Mr Sears said NIB will continue to focus on its “robust and proactive collection strategy” to ensure workers continue to receive benefits due.

“In response, we continue to prioritise a robust and proactive collection strategy, aimed at improving compliance and expanding our contribution base. This includes enhanced engagement with employers, targeted audits, and strengthened enforcement mechanisms,” he added.

Mr Sears said NIB is diversifying its investment plans for its US assets. Investment income was $55.5m in 2025, a $6.1m decrease from $61.6m in 2024.

“Investment risk tolerance for 2025 was conservative, with a focus on income and capital appreciation. With the Fund heavily invested in the Bahamas government and quasi-government entities, local and private entities and more, the strategy for 2025 was to continue to increase equities and securities and implement the diversification trading plan for US assets,” said Mr Sears.

“In April 2025, NIB’s investments stood at $1.186bn. The yield as of May 2025 was 3.9 percent. In December 2024, NIB’s investment stood at $1.22bn. The investment rate of return during 2024 was 4.7 percent. Investment income totalled $55.5m in 2025 compared to $61.6 m in the previous year, representing a decrease of $6.1m.”

Mr Sears said NIB will recoup the losses through a combined $100m bond extension, renegotiating terms of property financial leases and re-entering the international stock and bond markets.

“NIB will pursue a three-pronged strategy in the coming year. First, there was a recent extension of approximately $100m of the Bahamas Mortgage Corporation and the Education Loan Authority bonds, which will result in an additional $2m income each year for the 15-year duration of these bonds,” said Mr Sears.

“Second, in 2025-2026, there will be a renegotiation of the terms of the property financial leases with a 2 percent yield, which will add $5m in incremental revenue on almost a $250m balance outstanding. Third, NIB’s re-entry into the international stock and bond markets, about 10 percent of its portfolio, will increase the liquidity and diversification of the portfolio and enhance returns.”